|Chennai||Rs. 27580.00 (0.18%)|
|Mumbai||Rs. 28700.00 (0%)|
|Delhi||Rs. 27700.00 (0.73%)|
|Kolkata||Rs. 28270.00 (0%)|
|Kerala||Rs. 27050.00 (0.74%)|
|Bangalore||Rs. 27350.00 (1.11%)|
|Hyderabad||Rs. 27660.00 (1.21%)|
Has the power sector managed to break free from the many constraints on its growth?
Consider that the country is set to witness its second-highest capacity addition in a year, of 17,500 Mw this financial year, after adding 20,500 Mw in 2011-12. For comparison, China has of late been adding around 25,000 Mw annually.
Thermal power generation (three-fourths of total power output), has jumped nine per cent to 631 billion units (BUs) in 2012-13, after growing at an average of less than six per cent annually in the earlier Plan period (2007-12).
The country's power deficit has come down to nine per cent from 11 per cent last year, as the coal stock position at a number of thermal power stations has been pulled out of the danger zone. The number of stations running at critical stocks - sufficient to sustain operations for less than seven days - has been brought down from 44 in February 2012 to 35 now.
The industrial output data validates the sector's upward growth trend, pointing to its emergence as one of the economy's better performing areas. While overall industrial output increased merely 0.7 per cent, pulled down by a dismal manufacturing growth of 0.7 per cent and shrinking of mining output, the electricity sector grew 4.6 per cent between April and December 2012.
All this thanks, largely, to a dramatic jump in coal supplies by Coal India (CIL), the government-owned near-monopoly. Its latest data rebuts the popular notion of a huge coal shortage and reveals why companies have readied investment commitments of lakhs of crore in the power sector. Unlike the popular perception of stranded capacities for want of coal, CIL's supplies to power utilities increased 11 per cent to 247 million tonnes (mt) between April and December 2012.
Further, there has been a startling 18 per cent jump in coal supply to NTPC. In April-December 2011-12, growth in supply to power utilities was flat and supply for NTPC down 2.5 per cent.
To add to the build-up of positive sentiment and eliminate a major irritant in growth, CIL has already committed to meet at least 85 per cent of the coal requirement of 60,000 Mw capacity power stations to be commissioned through 2017. Taking a cue from the assured supply, top power companies have readied major investments of an order that hardly indicate a slowdown.
Coal India Chairman S Narsing Rao attributed the improved coal supply to liquidation of pithead stocks and better coordination with Indian Railways, which boosted offtake. "We have ensured better coordination with the railways. Therefore, the average rake availability in February this year has been about 214 per day, as against 193 rakes in February last year. Also, CIL has been able to liquidate 25.95 mt of ground stock during the first nine months of the current financial year," Rao told Business Standard.
Coal India had pithead stocks of 71 mt in April 2012. The company had allowed power utilities to pick up coal from its stocks to meet the shortfall at stations. It loaded 190 rakes a day during October-December on an average, a 11 per cent increase against the daily loading of 171.8 rakes during the same period in 2011. There are, however, questions about the sustainability of the increase in CIL supplies as pithead stocks erode and its annual production increase continues to hover around six per cent
India's annual capacity addition grew from 9,585 Mw in 2009-10 to 12,160 Mw in 2010-11 and to 20,501 Mw in 2011-12, the highest in a single year so far and equal to the capacity added in the 10th Plan (2002-07). This can be largely attributed to the rise of the private sector.
Of the addition in power capacity in this period, the private industry's contribution rose from 4,200 Mw in 2009-10 to 5,121 Mw in 2010-11 and a mammoth 11,970 Mw in 2011-12. The private sector accounted for 58 per cent or 6,365 Mw of the 11,050 Mw capacity commissioned between April 2012 and January 2013.
Business Standard spoke to three top private power companies - GMR Energy, Lanco and the largest generator, Tata Power. Far from slowing, the capital expenditure figures shared by the companies indicated a huge investment rush in the pipeline. Tata Power invested Rs 1,800 crore in power projects in 2011-12 and Rs 570 crore during the first three quarters this year. Lanco has invested a little over Rs 3,000 crore in setting up three projects totalling 4,000 Mw over three years. It plans to inject Rs 1,900 crore to commission this capacity soon. GMR Energy has invested Rs 5,400 crore in ongoing projects this financial year, around 18 per cent of the company's investment of Rs 30,000 crore in India. Its investment commitment would be in the range of Rs 3,500 crore over the next couple of years.
However, Tata Power said there was a need to address issues still plaguing the sector, including distribution reforms and rationalisation of power supply rates. Lanco blamed CIL for lack of assured coal supply and GMR Energy attributed the current spurt in capacity addition to what it said was the residual effect of the huge investment cycle peak of 2008-09.
Investment data of 27 listed power companies, sourced from Capitaline Database and compiled from the Business Standard Research Bureau, show their asset worth has been growing at a little over 20 per cent annually over the past three years. Their combined worth of fixed assets increased from Rs 460,091 crore in 2010-11 to Rs 592,461 crore in 2011-12. Also, additional capital expenditure by these companies jumped 72 per cent to Rs 132,369 crore in 2011-12.
Experts agree the sector has been on the path to recovery. "The government has done a good job in getting the focus back on the immediate issues that had been hurting growth," Shubhranshu Patnaik, senior director at Deloitte said. "Coal supply for plants has increased which will help addressing the undesirable situation of about 10,000 Mw of new generating capacity operating at less than 60 per cent plant load factor (PLF) last calendar year."
He said the structural issues hurting the sector's long-term growth are yet to be resolved. "While fuel supply agreements are getting signed now, there is a concern over the impact of the delay. The coal supply projections are way short of the demand from capacities." He said addressing domestic coal capacity enhancements, by addressing environmental clearance issues for new mines and accelerating award of captive coal blocks on competitive bidding basis as well as clarity on imported coal exports and its commercial treatment are pending resolution.